Sunday, January 27, 2008

What Are Your Minimums?

When I start a longterm, serious, important business relationship with someone, I eventually ask this question:

How big does a deal have to be for me to bring it to you?

You should consider the same thing in your business. How big does a deal have to be to get your attention?

If your answer is $1, or $100, or even $500, then you are destined to be a sole proprietor who never advances beyond where you are today. Sorry. It's true.

For most SMB Consultants on a growth track, the common responses are in the range of $5,000, $10,000, and $25,000.

Perspective: What is your minimum customer size? What is your minimum service agreement size?

If you have a "silver" package with a minimum of $500 per month, then your minimum client size is $6,000.

So let's say I come to you with a proposal to do some business with me. And let's say I offer you the opportunity to make a whopping $300. Interested? How about for $500? $1,000? As the numbers get larger, you'll eventually become interested.

On one hand, we're always tempted by money. On the other hand, what do we need to give up to make that money?

I've often been tempted to do a job because someone's in a hurry, their server's crashed, or they're crying on the phone (okay, that one's not so common, but it does happen).

I've learned to have the presence of mind to ask about the long-term relationship. The options are pretty simple:

1) "We just need this fixed. Then we're done."
- - Bzzzzzzzzzzzzzzz. Thank you for playing. Even if this job is worth a thousand dollars, it's not worth it. I have clients under contract who are relying on us to keep their systems purring. So I have to be pretty bored to take on this job.

2) "If you do well on this job, we'll sit down and talk about a service contract."
- - Ahhh. Much better. Whether they're just agreeing due to the pressure, or they're really interested, you've got an opportunity. An opportunity is pretty much all you can ask for. Once you kick butt and take names with the emergency, you'll have a chance to give your sales pitch based on past performance.

3) "You're our company! Let's sign a deal now so that as much of this as possible is covered by the service agreement."
- - Nirvana. You still have to kick butt. But now you can fix the immediate problem with an eye to documenting the network and getting the relationship off on the right foot.


Outside your core business there are also opportunities. I've had several "opportunities" to make a little extra money this month. In two particular cases, I think the folks who brought me opportunities were surprised by my resistance.

Just so you know, KPEnterprises' answer to the big question is $6,000. Last year it was $5k. The year before it was $3k. Just as with any other metric, this changes over time.

For me personally, a new venture needs to be closer to $10k in order to take my attention off the other things I have going. And that number is only so low because I have a staff I can funnel opportunities to.


Let's say I come to you and say I want to get you interested in a Podcasting business. I'll provide scripts, powerpoints, examples, catalogs of hardware and software. You can expect to make $500 - $1,000 on each entry-level job. After you hook a really eager client, they could be worth twelve projects a year at $1,500 each. Maybe more.

If your response was "Hell Yes!" click click click "Sign me up!" then you need to slow down and think about what you're doing.

1) Is this your core business? If not, where does it fit?

2) What does this cost you in real money, out of pocket, over the next few months?

3) What does this cost you in time off task with respect to your current, profitable business?

4) Is this a business you know, understand, find exciting, and want to get into?

5) Do you already have clients who would gobble this up, or do you need to "start over" with them regarding sales of this product?


As entrepreneurs, it's good for us to be excited by opportunities. We're like pack rats. We see shiny objects and we want to pick them up. But you can't pick up every shiny opportunity out there.

You have to have some filtering system. Money is one filter.

So let's say something does meet your threshold. What's next? Do you eagerly sign up, make commitments, and jump in? I hope not.

Next time we'll discuss how to come up with a quick mini-business plan.

1 comment:

  1. Anonymous7:17 PM

    Karl, your posts are always right on. Thanks for providing great content!

    Brian Williams


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